Labor or Bust? President Biden Orders Project Labor Agreements for Large Federal Construction Projects

On February 4, 2022, President Biden issued Executive Order 14063 ("EO") requiring the use of project labor agreements for large federal construction projects. The EO requires that a contractor or subcontractor proposing to work on a federal construction contract valued at greater than $35,000,000 must negotiate or enter into a "Project Labor Agreement" ("PLA") with one or more "appropriate labor organizations" as part of the offeror’s bid. EO Sections 2(c) & 3.

Once regulations are issued, the EO will revoke Executive Order 13502 issued in 2009, which permitted (but did not require) the use of PLAs for federal construction projects costing $25,000,000 or more. EO Section 10. The use of PLAs under the 2009 Executive Order was quite rare, making the 2022 EO an important pro-union change in how large federal construction projects will be proposed and staffed by contractors and subcontractors.

In the EO, a PLA is defined as a pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a proposed project. The EO applies to federal contracts for domestic "Large-Scale Construction Projects" with a total estimated construction cost of $35,000,000 or more. EO Section 2(c).

The EO requires that each PLA: (a) bind all contractors and subcontractors through the inclusion of appropriate specifications; (b) allow all contractors and subcontractors to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements; (c) contain guarantees against strikes, lockouts and similar job disruptions; (d) set forth effective, prompt and mutually binding procedures for resolving labor disputes arising during the term of the project labor agreement; (e) provide other mechanisms for labor-management cooperation on matters of mutual interest and concern; and (f) fully conform to all rules and regulations. EO Section 4.

The EO includes exceptions. A federal agency may grant an exception to the PLA requirement if it finds that requiring a PLA would: (a) not advance the federal government’s interests in achieving economy and efficiency in federal procurement (the EO identifies several factors relevant to this exception, including: "projects of short duration," projects requiring "specialized construction work" available from a limited number of businesses and "unusual and compelling urgency"), (b) substantially reduce the number of potential bidders so as to frustrate full and open competition, and (c) be inconsistent with other rules and regulations. EO Section 5. Exceptions must be documented no later than the solicitation date by a written explanation. EO Section 5.

This EO is immediately effective and applies to all contract solicitations issued after June 4, 2022 (or 120 days after the date of this EO, provided that the FAR Council timely issues implementing regulations). EO Sections 8, 12. Agencies are "strongly encouraged" to include the PLA requirement for federal construction contracts issued before June 4, 2022. EO Section 12. The EO appears to give agencies discretion to include PLA requirements in lower-cost construction projects and in projects receiving any form federal assistance "including loans, loan guarantees, revolving funds, tax credits, tax credit bonds, and cooperative agreements." EO Section 7.

For federal construction projects performed in North Carolina, agencies may seek to avoid the PLA requirement by applying one or more of Section 5’s exceptions, particularly if the relatively low number of labor organizations in the Southeast "reduces the number of potential bidders" available to bid. Relatedly, and a bit unexpectedly, there is no express exception to the PLA requirement if the project price would increase because of the EO. The EO requires agencies to publish their use of PLAs and to describe when exceptions are granted. EO Section 6.

It is unclear how burdensome the PLA exception process will be until regulations are issued; affected contractors and industry groups should consider submitting comments on proposed regulations when they are published. President Biden described himself as a "union president" during remarks made when he signed the EO, and he said that the EO was designed to "make sure that federal construction projects are staffed with good-paying union jobs." Accordingly, exceptions to the PLA requirement may be tightly curtailed. Compliance with the EO will be key to success for federal contractors bidding on any applicable federal construction contract, and offerors will need to take extra steps to ensure compliance with these new requirements.